BASIC LENDER GUIDELINES
The monthly mortgage payment should not exceed 28% of the buyer’s gross income.
The buyer’s total debt payments should not exceed 36% of the buyer’s gross income.
MORTGAGE TERMS
CLOSING COSTS Also known as settlement costs. These expenses (estimate about 3% of the loan) are in addition to the down payment. These fees vary based on the type of loan and your lender and closing attorney fees.
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POINTS When you buy points, you’re paying more upfront in exchange for a lower interest rate, which means you pay less over time. Each point equals 1% of the mortgage.
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ADJUSTABLE-RATE MORTGAGE (ARM)
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DEBT-TO-INCOME RATIO the ratio of monthly liabilities and housing expenses divided by the monthly gross income of the borrower.
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A mortgage with a variable interest rate, which can go up or down with the federal funds rate. There are three different kind of interest rate caps – initial, subsequent, or lifetime.
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